The effectiveness of entry deregulation: Novel evidence from removing minimum capital requirements

Hua Cheng, Siying Ding and Yongzheng Liu

Journal of Development Economics, 2024, vol. 170, issue C

Abstract: Although minimum paid-in capital requirements impede firm entry, governments worldwide have only recently started to reduce or remove such requirements. This study is among the first to examine the effectiveness of an entry deregulation reform in China that eliminated such requirements. We exploit city–year–month variation in reform implementation and employ a large nationwide administrative dataset of firm registrations, finding that the deregulation strongly encourages firm and job creation. Moreover, we find that the deregulation exerts a pro-competitive effect by encouraging the entry of small and medium-sized firms, private firms, and single-shareholder firms, which diversifies the industrial bases and reduces the industrial concentration of economic activity. Finally, we provide suggestive evidence that the deregulation promotes economic growth in the deregulated cities.

Keywords: Entry deregulation; Paid-in capital; Firm entry; Job creation; Market dynamics (search for similar items in EconPapers)
JEL-codes: L22 L26 L51 O12 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:170:y:2024:i:c:s0304387824000531

DOI: 10.1016/j.jdeveco.2024.103304

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